The Wall Street Journalreports on C1 that Charlotte-based Wachovia is getting a capital infusion of as much as $7 billion this week, showing that the financial crisis is very much not over.

The deal comes just two months after the bank, the nation’s fourth biggest, picked up $3.5 billion in new cash by selling preferred stock (The New York Timessays the total raised, including other securities, was $8.3 billion). Washington Mutual last week raised $7 billion in new capital. Bloomberg says banks and securities firms have so far raised $140 billion to replace capital wiped out in the credit crisis.

The NYT, unlike the Financial Times and Bloomberg, doesn’t credit the WSJ with the scoop, and says it’s “unclear” if the money will come from a private group or a public sale, though the Journal is pretty clear that it’s the former, adding that the buyers aren’t expected to be so-called sovereign wealth funds.

Bloomberg and Reuters report that the WSJ said Warburg Pincus is one of the buyers, but something happened to that bit of news between last night and the time the paper went to bed.

Issuing new shares like this dilutes the $55 billion value of the shares held by existing shareholders. This deal would be worse because it sells the new shares at a 15 percent discount to Friday’s closing price.

The papers say Wachovia’s $24 billion purchase of adjustable rate-mortgage lender Golden West Financial, at the height of the madness in 2006, is to blame for much of its current woes. Bloomberg says nearly 60 percent of the bank’s $120 billion in ARMs are in hard-hit California. Wachovia was an overly aggressive commercial real-estate lender during the bubble, too.

Nobody attempts to explain why Wachovia is raising capital at such onerous costs when it is still paying out $5 billion a year in dividends.

Hungry planet

The FT and WSJ front, and the <i>NYT puts on A12, reports on global food inflation, saying World Bank and International Monetary Fund officials tried in meetings this weekend to figure out a plan of action for the crisis, which has sparked riots in several countries and led to the ouster of the Haitian prime minister.

The NYT’s lede reports that leaders said food prices “posed a potentially greater threat to economic and political stability than the turmoil in capital markets.”

Dominique Strauss-Kahn, the managing director of the International Monetary Fund, said the food crisis posed questions about the survivability of democracy and political regimes. “As we know in the past, sometimes those questions lead to war,” he said. “We now need to devote 100 percent of our time to these questions.”

The Journal notes that World Bank figures say food prices are up 83 percent in three years, but says the meetings produced few real results other than a consensus that U.S. subsidies for corn and biofuel are a big part of the problem. The Indian finance minister called it “a crime against humanity.”

As has been reported for weeks, the WSJ notes that countries are banning exports of food to protect their own supplies. But Bloomberg has an interesting take, noting that the problems have toppled import barriers that protect their farmers—something it says the Doha trade negotiations haven’t been able to do for seven years now.

The Journal on page two says high food prices are pretty much “here to stay” because of inflation in farm costs.

Ugly Americans

The NYTfronts a story on popping housing bubbles around the world, something it blames “to some extent” on the struggles of the U.S. market, which has caused credit to tighten everywhere.

In Ireland, Spain, Britain and elsewhere, housing markets that soared over the last decade are falling back to earth. Property analysts predict that some countries, like this one, will face an even more wrenching adjustment than that of the United States, including the possibility that the downturn could become a wholesale collapse…

That reality is spreading. Once-sizzling housing markets in Eastern Europe and the Baltic states are cooling rapidly, as nervous Western Europeans stop buying investment properties in Warsaw, Tallinn, Estonia and other real estate Klondikes.
Further east, in India and southern China, prices are no longer surging. With stock markets down sharply after reaching heady levels, people do not have as much cash to buy property.

The Times says prices have fallen 20 percent in a year in some parts of India, and notes that the housing market accounts for a whopping 12 percent of the Irish economy—three times that of the U.S.

Delta (Northwest) Dawn?

The WSJ and the FT report on their front pages, and the NYThas it on A14, that the Delta/Northwest airline merger is about to go down, though the Journal spends the first several paragraphs hemming and hawing about whether, in fact, it actually will happen. The WSJ says it “may” happen and “could” value Northwest at $3 billion and emphasizes that a deal risks problems with the two firms’ powerful pilot unions and that “other factors could delay or derail a deal.”

We assume this is just the Journal excessively covering its backside, since it did put such a “maybe” story on page one. The FT just says the deal is “close” and “set to be announced on Tuesday” or maybe today, and the NYT notes that the two camps have seemed close to a deal before only to back away.

The airline business has been slammed in the last couple of months. The Journal:

The high fuel prices and lack of credit hurting major sectors of the U.S. economy have been particularly tough on airlines. Several big carriers, including Delta and Northwest, have recently said they plan to shrink their domestic capacity and retire airplanes. Delta also announced plans last month to cut 2,000 jobs, or about 4% of its work force.

Four smaller carriers have filed for bankruptcy-court protection in the past few weeks, with three abruptly shutting down operations.

The WSJ notes that the price tag for Northwest puts its value at more than a third less than it was worth two months ago.

Well-oiled machine

The Journal on A4 says that the Silvestre Reyes, the Texas Democrat and House Intelligence Committee chairman, took a $24,000 campaign donation from a company five weeks after he gave it a $2.6 million earmark for a no-bid contract.

The paper also reports the company, Digital Fusion, based in Huntsville, Alabama, asked its execs to give money to powerful politicians and reimbursed some of them—a big no-no.

The congressman and the company say, “Nothing to see here.” Of course not.

Plastic melts

In economic news, the NYTreports that a research firm finds that credit-card offers are way down, from 904 million sent in October to 690 million in February, probably as a result of the credit crisis.

What bad economy?

Finally, the NYT fronts a fascinating story about how the “ultrarich” are still spending like it’s 1928, er, 2007. It says seventy-one apartments have sold in Manhattan this year for more than $10 million, up from seventeen for all of 2007.

“When times get tough, the smart spend money,” said David Monn, an event planner who is organizing a black-tie party on May 10 for dignitaries and recent purchasers of apartments at the Plaza Hotel; the average price there was $7 million. “Short of our country going on food stamps, I don’t think we’re doing anything differently.”

The Times notes that Bear Stearns hero Jimmy Cayne is invited to the Plaza party, which will have “a dozen female string musicians made up to look like statues and clothed in dresses of fresh flowers, like roses and gardenias. There will be caviar and Cognac bars, as well as a buffet designed to visually replicate 17th-century Dutch paintings from the recent Metropolitan Museum of Art exhibit, ‘The Age of Rembrandt.’”

Read the whole thing, replete with anecdotes about rich guys spending money only on what they “feel is important” like 300-guest dessert parties, but here is our favorite passage:

In October, Marc Sperling, the 36-year-old president of an equity-trading company, bought a new condo on the Upper West Side in a building where four-bedroom apartments like his cost more than $4 million. When he moves into the completed building next year, he plans to hold on to his other two apartments in Murray Hill and Miami Beach—each of which he values at about $2.5 million.

Mr. Sperling views the nation’s economic slump as a temporary problem, and is grateful that it has yet to affect him. “I think if you have the means to ride it out, that’s what you do,” he said.

His view of the subprime mortgage crisis seemed to reflect a sort of inverse class resentment.

“I don’t want to sound harsh, but the people who were buying million-dollar houses with a combined household income of $70,000 or $80,000 were the ones who were chasing easy money,” he said.

That’s our Let Them Eat Cake Quote of the Day.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.

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